What Is A Title Commitment?
A title commitment (also called a "title insurance commitment" or "preliminary title report") is a document issued by a title company before closing that outlines the conditions under which it will issue a title insurance policy. It serves as a promise from the title company to insure the property's title, provided certain requirements are met.
Role of Title Commitments Before Closing
1. Confirms Clear Ownership
The title commitment reviews the chain of ownership to ensure the seller has the legal right to transfer the property. It helps uncover potential ownership disputes, missing heirs, or fraudulent transfers.
2. Identifies Liens & Encumbrances
It discloses any existing mortgages, unpaid taxes, HOA liens, or judgments that must be cleared before closing. If any issues exist, they must be resolved for the title to be insurable.
3. Lists Title Exceptions & Limitations
It details certain restrictions or easements (such as utility lines or access roads) may impact the use of the property. The buyer is made aware of any limitations before finalizing the purchase.
4. Outlines Requirements for Closing
The title commitment specifies what must be completed before issuing a title policy, such as:
Paying off existing liens.
Releasing judgments or legal claims
Recording necessary documents
5. Protects the Buyer & Lender
Lenders require a Loan Policy of Title Insurance to ensure they have a valid lien on the property. Buyers receive an Owner’s Title Policy to protect against hidden claims or future disputes.
Key Takeaway
A title commitment is a critical step before closing, as it ensures the property’s title is legally sound and insurable. It helps buyers and lenders identify and address potential risks, preventing costly surprises after the purchase.
